We Have Been Quietly Buying Real Estate in the New Albany, Ohio Area To Serve as Our Personal and Business Headquarters
Following a nationwide search that took more than a year, involved several dozen variables (ranging from tax rates to climate projections over the coming decades), and included two site visits, Aaron and I have been quietly purchasing real estate in and around New Albany, Ohio.
The city, ranked as the number one suburb in America by Business Insider, beat out the other two finalists as we looked far and wide for a place to establish a permanent home for both our family and our wealth management firm. (For those who are curious, the runners up were Cornelius, North Carolina, which is outside of Charlotte, the nation’s second most important banking and financial center behind only New York, and Alpharetta, Georgia, which is outside of Atlanta, an economic powerhouse with a broadly diversified economy, although we were equally as open to the Buckhead area.) I shared with you that this was coming in a recent post – the fact we had identified another area, though I only let clients of our firm know where it was in a privately published letter since I didn’t want to publicly announce it, yet – so it probably isn’t a huge shock.
If you haven’t heard of New Albany, Ohio, you will; most likely, sooner rather than later. The city is one of the wealthiest in the world. It boasts a household median income of $224,824 versus $149,471 in Newport Beach. More astonishing, not only are taxes in Ohio a fraction of what they are in California so those far higher median incomes go further, but the median home price is New Albany is only $634,600 versus $2,000,000 in Newport Beach, while providing far nicer, higher quality construction, better materials, and significantly more space, both internally and in terms of land. For example, in the New Albany Country Club areas, houses tend to run from $850,000 to $3,000,000 or so but what you get for that money is order of magnitudes higher than in Southern California. This means attracting and retaining talent for Kennon-Green & Co. will be notably easier as we can better help our staff accelerate their own capital accumulation. As employers, that matters to us.
New Albany itself consists of around 11,000 folks, mostly families, living in roughly 3,300 households often headed by well-educated professionals including executives at publicly traded companies, physicians, attorneys, business owners, real estate developers, and investors, while being part of a multi-million person metropolitan area that is within 500 miles or so of 50% of the population of the U.S. and Canada. (That last point is particularly important. I can have breakfast with my family and, by lunch, be in New York, Chicago, Boston, Philadelphia, Washington, D.C., Atlanta, Charlotte, Lexington, Louisville, Indianapolis, Nashville, St. Louis, Kansas City, Omaha, Minneapolis, Dallas, Houston, Orlando, Toronto, or any other number of cities. There is a reason Berkshire Hathaway’s NetJets is headquartered down the road.)
Intel is constructing a fabrication plant in New Albany that will become one of the largest microchip manufacturing facilities on the planet. The initial investment, expected at $20 billion, could rise to $100 billion over the next decade, and will bring thousands upon thousands of highly-paid jobs into the region that further cause a fairly small geographic area to scale in ways that are presently unfathomable. In addition, companies such as Alphabet, Microsoft, Meta Platforms, and a host of other technological giants have been acquiring hundreds of acres to break ground on their own projects, constructing facilities in an area that is expected to sail through climate change fairly unscathed compared to much of North America. Fueled by these mega projects that will transform the area, population projections put the 15-county Central Ohio region at more than 3.15 million residents between now and 2050, making it roughly the same size as Orange County, California in the present. Half of that regional growth is expected to occur in Franklin County, where New Albany is located, providing a generational tailwind that should not be underestimated.
On that same note of generational tailwinds: As I mentioned a moment ago, New Albany is also a climate haven. Do not underestimate the importance of this. Absent a black swan event, of most of the municipalities we considered, Columbus should breeze through the next century or so while the coastal cities flood and the south burns. In the meantime, the present climate is quite comfortable for folks like us who grew up in Missouri. Sure, you have some cold winters but it’s nothing compared to further north. For the gardeners out there, it’s in Growing Zone 6.
The major challenge is that, in New Albany proper, housing is so restricted with so little turnover that pulling up real estate listings is all but useless. It does not in any way, shape, or form show you what the housing stock in the city looks like. To provide a better idea of how beautiful this city is, here is a roughly 35 minute drive Aaron and I took, randomly filming street after street in New Albany, back on July 13th, 2023. (Note, I recommend you click the gear in the YouTube video and change the quality to 4K then view it in full screen for the best experience.).
This land restriction, on the other hand, should serve the community well. New Albany is, without question, one of the best designed cities in the world. For example, the house that Aaron and I bought to serve as our family’s primary residence is part of not one, not two, but three – yes, three – distinct Homeowners Associations, each imposing various covenants and requiring separate dues designed to keep the architectural guidelines of the city intact regardless of growth so folk’s investment is protected. These restrictions are what make the community so desirable. They help tie together a cohesive vision that includes more than 68 miles of walking trails thoughtfully built into the landscape so you can pick a direction, essentially, and make your way through town from almost anywhere.
I mean, for heaven’s sake, look at the public high school – a 150,000 square foot building constructed with Buckingham Tudor and Marley Tudor brick, made by General Shale, so it psychologically reads as a classic red schoolhouse in the Georgian architectural style. This is exactly what government should be doing. I’m being entirely serious when I say it makes me excited to start paying taxes here.
Speaking of taxes, I cannot emphasize enough the importance of various state-level reforms in recent years. I remain continually shocked by the degree of over-reliance folks have on search engines and the internet in general. Ohio’s laws have changed so significantly in recent years that essentially every single search result on the front page of Google when you search “Ohio income tax rate” is now wrong or, at least, deeply misleading.
One perfect illustration: The reality is – and I’m oversimplifying a bit here for the sake of brevity – after full phase-in for tax year 2024, the top state-level income tax is going to be 3.50% plus a small local tax depending upon municipality. Business owners, however, can take significant deductions, and, if married, exclude $250,000 in income from state-level taxation entirely, then, any amount above these thresholds can exploit a PTE mechanism tax rate of 3.0% that removes the SALT deduction limit at the Federal level so the true tax above those exceptions for those in the top marginal bracket is really a net 1.89%. Using a combination of a 401(k) profit sharing plan and a pension setup, a married couple, properly structured, could really pay essentially no state-level income tax on the first $600,000 to $800,000 in earnings depending upon their respective ages and how that influences the actuarial inputs to the pension plan contributions limits. The local tax in most of New Albany is 2.0% but excludes investment income including capital gains, dividends, and interest. Taken together, for those who would be subject to a gross receipts tax, like the ones found in Tennessee or New Hampshire, Ohio is far more attractive despite the others being “tax-free”. (It’s not, quite, as good as Texas but it’s pretty darn close for those who have the ability to put together the overall structure intelligently. I consider that excess justifiable given that I’m 41 and Columbus should be a relative paradise compared to Texas as, God willing, I reach my 60s, 70s, and 80s, based upon present-known climate science.)
I’ll post more on the decision to establish our permanent base in New Albany, and share some thoughts on the six years we spent in California, in a future update. There are definitely some trade-offs but the calculations are so extreme, it’s a no-brainer.